Currency headwinds likely to hurt Procter & Gamble (PG) Q1 earnings

The Procter & Gamble Company (NYSE: PG) is slated to report its first-quarter earnings on Tuesday, October 22, before the market opens. The consumer staples giant will continue to rely on the creation of new innovative products as well as on the continued growth and success of existing brands and products.

The results could be adversely impacted by foreign exchange fluctuations that will lower the US dollar value of revenues, profits and cash flow it receive from non-US markets, increases supply costs, and negatively impact competitiveness in those markets. Also, the results could be hurt by the reduced demand for its products due to global economic disruptions.

The company, which has a strong product portfolio, is expected to generate higher organic sales backed by a favorable product mix, along with pricing and volumes. The results will be benefited by organic sales growth and lower effective tax rate while higher costs and negative currency impacts could dampen it.

Analysts expect the company’s earnings to increase by 10.70% to $1.24 per share and revenue will rise by 4.4% to $17.43 billion for the first quarter of 2020. The company has surprised investors by beating analysts’ expectations in all of the past four quarters. The analysts remained neutral on the company as half of them recommended a “buy” while the balance suggested a “hold” with an average price target of $124.

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For the fourth quarter, Procter & Gamble slipped to a loss from a profit last year, due to one-time, non-cash accounting adjustments to the carrying values of the Gillette Shave Care business. Net sales rose by 4% while higher pricing and positive mix drove organic sales higher by 7%.

Looking ahead into fiscal 2020, the company expects all-in sales growth in the range of 3% to 4% and GAAP earnings per share in the range of 222% to 240%. The core EPS growth is anticipated to be in the range of 4% to 9% versus fiscal 2019 core EPS of $4.52.